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Key Takeaways
- We’re in the early innings: AI adoption is moving from adoption into core workflows via agentic systems, shifting from passive chatbots to active execution and decision-making.
- Race for scale: Intense competition is driving sustained investment across hyperscalers, broader tech, and capital-intensive sectors like industrials and utilities.
- Convertible tailwinds: This is fueling issuance and liquidity in convertibles, offering investors AI-linked growth with downside protection from strong, well-capitalized issuers.
Is the AI Capex Boom Real?
The AI capex boom is unequivocally real, it is no longer an experimental concept, but a structural pillar of modern corporate strategy. AI investment is accelerating rapidly, led by the world’s largest and most profitable hyperscalers—global cloud platforms such as Google, Amazon, Microsoft, and Oracle, positioning themselves at the forefront of an increasingly AI-enabled future. Over the last ten years, capex trends by the major hyperscalers have exploded, underscoring the AI-driven demand and the need for alternative sources of financing.
Members of JPMorgan’s U.S. Enterprise Software & Credit Strategy teams highlight three important points about the AI investment cycle:
- “We are in the very early innings of the buildout and adoption of AI models. We believe this process will play out over the next 15 to 20 years, and we are only in the second or third year of the infrastructure build.”
- “63% of CIOs report having both the appetite and the budget to invest in AI.”
- “AI infrastructure spending is expected to remain structurally elevated through at least 2028.”
J.P. Morgan estimates that the capital required to finance the AI capex boom could exceed $5 trillion, with both public and private markets playing a criticalrole in funding this multi-year buildout.
The Expanding Opportunity Set
While the technology hyperscalers remain at the forefront of AI investment, demand for AI-driven infrastructure and capital expenditure extends far beyond them; it encompasses semiconductors, enterprise software, and energy and utility infrastructure. Together, this broader ecosystem is building the backbone of a new digital paradigm defined by intelligent systems, automation, and intensifying competition for market leadership. The wide dispersion of participants, coupled with the growing need to fund large-scale infrastructure, is driving a structural shift from asset-light to more asset-intensive business models.
Hyperscalers, AI infrastructure and “neocloud” players are diversifying beyond traditional debt markets to include hybrid capital solutions. In particular, convertible debt and convertible preferreds, are emerging as a key financing tool for CFOs, offering a balance of cost efficiency, especially in a higher interest rate environment, and reduced dilution relative to traditional equity. For investors, convertibles provide a compelling risk-return profile, combining income generation with equity upside participation and a degree of downside protection. The market is further supported by a high-quality issuer base, typically comprising companies with strong balance sheets, solid cash flows, and moderate leverage profiles.
Massive global capital requirements, amplified by the AI capex boom, have driven robust issuance in the convertible market in recent years. According to BofA, of the +$100 billion in global convertible issuance this year, over 40% is linked to AI, underscoring the strong investor demand.
This year, leading companies have increasingly turned to the convertible market to fund large-scale AI initiatives, highlighted by several high-profile transactions. These include a $5 capital billion raise by Oracle, a $3.5 billion offering from cloud infrastructure provider CoreWeave, and $3 billion from Australia-based data center operator IREN Limited. The average convertible deal size is now over $800M, creating a larger, more liquid investment opportunity set.
A Glimpse into the Google Deal
- In early June 2026 Alphabet, Google’s parent company, unveiled an $80 billion corporate equity raise aimed squarely at expanding its AI computing infrastructure.
- As part of this deal, the company issued $19 billion of convertible preferred stock, exceeding initial $16 billion projections and the largest such convertible/hybrid capital transaction on record. This deal underscores both the scale of AI-related capital needs and the growing strategic importance of hybrid financing solutions.
- The convertible preferreds will convert to Class A or Class C common shares in three years.
- Investors will receive an attractive 6.25% annual dividend, significantly higher than the 0.2% yield on Alphabet’s common stock and higher than the 3.7% coupon offered on Google’s 3-yr maturity straight bond.
- Most importantly, this Google convertible preferred illustrates the inherent positive asymmetry of convertibles— demonstrating clear downside protection in weaker markets while preserving meaningful participation in equity upside.
With the acceleration in AI capex, hybrid capital—led by convertibles—is well positioned to help
power the next phase of growth.
Google is a trademark of Google LLC.
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CONVERTIBLE SECURITIES INVESTMENT RISKS:
Investing involves risk. Principal loss is possible. Convertible securities are hybrid securities that combine the investment characteristics of bonds and common stocks. Convertible securities involve risks similar to those of both fixed income and equity securities. The market price of a convertible security generally tends to behave like that of a regular debt security; that is, if market interest rates rise, the value of a convertible security usually falls. The market value of a fixed-income security may decline due to general market conditions that are not specifically related to a particular issuer, such as real or perceived adverse economic conditions, changes in the outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. Below investment grade debt securities (also known as “junk bonds”) are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness. A substantial portion of the convertible securities market consists of issues which are unrated. This means they have not been issued a rating by a nationally recognized statistical rating organization and are not being monitored for credit rating changes, although in some cases the underlying corporation may have a corporate rating.
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